Despite Lower Revenue, Samsung Spent a Record Amount in R&D in 2014

Samsung’s revenue figures from 2014 are not something they like to talk about, especially on the world stage in front of competitors – but facts are facts. Samsung’s mobile division had a very disappointing year when compared to 2013, much of which had to do with the record sales of the Galaxy S4 in 2013 versus the rather disappointing sales of the Galaxy S5 in 2014. The other divisions of Samsung had a great year by all accounts – from appliances to HDTVs to displays to their memory and chip businesses – but it is their mobile division causing the real problem.

Despite Samsung’s lower revenues, they spent a record amount in Research and Development (R&D). According to an audit report done on March 8, Samsung spent and incredible 15.325507 trillion won (US$13.8 billion) in 2014 – this accounted for 7.4-percent of total sales for the year and an average of 1.2771 trillion won (US$1.1508 billion) a month. R&D expenses increased 3.7-percent from 2013…meaning that even though R&D investments were increasing in 2013 and 2014, sales decreased 9.8-percent.

The other interesting figures have to do with decreased advertising and sales promotions. Samsung spent 9.4-percent less in advertising dollars in 2014 than it did in 2013 – ‘only’ 3.773649 trillion won (US$3.40 billion), while sales promotions were down 3.2-percent to 7.760648 trillion won (US$6.99 billion) from 2013.

The decrease in advertising and the increase in R&D are not surprising – when sales are down, generally advertising is the first place a company will cut expenses. While some amount for advertising is necessary to sell a product – Samsung still spent US$3.4 billion in advertising and US$6.99 billion in promotions – you have to eventually put a cap on it if sales are poor. Samsung is a household name by now because of its HDTVs and home appliances so advertising dollars will only help so much.

While Samsung was understandably upset in 2014 with the sales of their Galaxy S5 model – especially after the increase R&D spending in 2013 – the last thing they would want to do is spend less in R&D while working on improving this year’s Galaxy S6 models. Besides, R&D is generally done a couple of years in advance of their current products – designing and testing for the future. Samsung introduced us to, not one, but two, new models this year – the Galaxy S6 and Galaxy S6 Edge – that are already generating record pre-orders from the distributors for sales starting in April. Rumors have it that Samsung will also push with a big advertising campaign at the same time and we will see if their combination of R&D and advertising expenditures will pay off in a great 2015.